San Bernardino Bondholder, Insurer Support Bankruptcy

July 11 (Bloomberg) -- San Bernardino should be allowed to
stay in bankruptcy, bond insurer Ambac Assurance Co. and a
bondholder owed $50 million said in court papers opposing other
creditors’ efforts to strip the California city of federal court
protection.

Ambac and Erste Europaische Pfandbrief-und
Kommunalkreditbank AG joined San Bernardino in asking a federal
judge to overrule objections of the California Public Employees’
Retirement System and the San Bernardino Public Employees’
Association. The objectors have challenged the legality of San
Bernardino’s 2012 Chapter 9 bankruptcy filing.

While in bankruptcy, Calpers and other creditors cannot sue
the city for failing to pay them. U.S. Bankruptcy Judge Meredith
Jury has scheduled a hearing for next month in Riverside,
California, to decide whether San Bernardino can remain in
bankruptcy.

The city of about 213,000, located about 60 miles (97
kilometers) east of Los Angeles, sought bankruptcy protection on
Aug. 1, claiming a cash crisis prevented it from first
negotiating with creditors, as required under California law.

This month, lawyers for the city filed a request for
summary judgment, asking Jury to allow San Bernardino to stay in
bankruptcy “so that the city can continue discussions and
negotiations with its creditors.”

The case is In re San Bernardino, 12-bk-28006, U.S.
Bankruptcy Court, Central District of California (Riverside).